Regulatory activities in the Swiss electricity market

It’s not just the market that is feeling the turbulent effects of the energy crisis. The regulatory space has seen a marked increase in the number and, in particular, the pace of statutory proposals and amendments. But alongside short-term challenges, work continues on long-term framework conditions. This article summarises and classifies the key regulatory developments in the second half of the year.

Parliament signals support for renewables

Parliament is currently debating the consolidation bill (an amendment of the Electricity Supply Act and the Energy Act) – the most important proposal from the perspective of the electricity market. Back in September 2022, the Council of States sent a clear signal in favour of renewable energy with numerous amendments to the Federal Council’s draft (including setting higher expansion targets, proposing a strengthening of the national interest in renewable energy sources and using floating market premiums as an additional funding instrument). The National Council’s Energy Committee (ESPEC-N) is currently discussing the proposal, and on 26 January 2023 it announced its initial rulings. The committee addressed a number of concerns raised by the Council of States around the strengthening of renewables, but it also rejected the easing of certain restrictions in the field of environmental protection. The ESPEC-N also wants the proposal to mandate compulsory solar installations for buildings.

In the autumn 2022 session, parliament also passed an emergency federal act to facilitate large-scale alpine photovoltaic systems (PV) in an accelerated process and provide for mandatory PV on buildings (a ‘solar offensive’). However, these provisions are time-limited to the end of 2025. Draft ordinance provisions for the solar offensive were presented in December 2022, but they do not yet offer sufficient planning security to project engineers. The final version is expected in mid-to-late March 2023. In tandem with the easing of restrictions for PV installations, parliament is currently also discussing an emergency federal act for wind turbines which is already at an advanced stage. The aim, in concrete terms, is for legally binding usage planning to also serve as a building permit, thus removing an additional legal step.

The expanded and amended funding instruments that arose from the Girod parliamentary initiative also came into force on 1 January 2023. Changes include the introduction of auctions as a means of distributing funding for large-scale PV facilities without self-consumption.

Reserves for strengthening security of supply

Even before the energy crisis, decreasing cross-border capacities meant that the establishment of reserves was an issue. But implementation has now accelerated considerably. The regulatory basis for recently established reserves is the Winter Reserve Ordinance which was passed in late January 2023 and which expands on the Hydropower Reserve Ordinance of September 2022. As a complement to hydropower reserves, two reserve fossil power plants (Birr and Cornaux) will form part of the winter reserve starting in February 2023. At the same time numerous emergency electricity aggregates will join the reserve, coordinated through ‘poolers’ such as Axpo and CKW. Further reserve capacities are expected in winter 2023/2024 through tender processes (incl. combined heat and power plants).

The challenge of high energy prices

In contrast to the EU, which has seen increasingly comprehensive measures for dampening electricity prices over the course of the last year, Switzerland hasn’t been as quick to resort to regulatory measures, largely focusing on voluntary energy-saving campaigns instead (for electricity and gas). One exception was the regulation that federal authorities introduced in November 2022, which allowed large-scale consumers to return to basic supply by joining a self-consumption organisation (ZEV). The potentially high procurement costs associated with a return will be borne by the relevant energy supplier and their basic supply customers.

The way forward

In the medium to long term, we will need to see the recent raft of temporary regulations replaced by tighter, stable, market-oriented regulations. This will be a challenge, and one that can only be mastered through cooperation between politicians, public authorities and electricity sector experts. It will also require a particular focus on acceleration of approval processes. This calls for solutions that go beyond the acceleration proposal presented by the Federal Council in February 2022, which is facing an uncertain future. We can only ensure Switzerland’s security of supply through a massive, accelerated expansion of winter electricity – especially while the electricity agreement with the EU remains a distant prospect.